Stablecoins have significant growth potential, with the global market projected to be worth as much as $750 billion by 2028. Stablecoins can move value quickly across borders and platforms while maintaining a steady, predictable value. But the systems that underpin that stability can be complicated, and using this currency comes with some risk. Below, we’ll explain stablecoin risk, what causes it, and how to manage it.

What’s in this article?

• What are stablecoin risk management strategies?
  
• What are the different types of stablecoin risk?
  
• How do reserve structures influence stablecoin risk?
  
• What vulnerabilities exist in stablecoin systems?
  
• How do settlement models introduce risk to stablecoins?
  
• How can organizations mitigate stablecoin risk?
  
• How Stripe can help
  

What are stablecoin risk management strategies?

Stablecoin risk management strategies are methods of minimizing and preventing risks related to the use of this cryptocurrency. Stablecoins are designed to maintain a stable value, and they carry certain risks that don’t apply to cash since they’re not considered legal tender. There’s a set of financial, technical, and regulatory risks associated with stablecoins, mostly related to their reserves, regulatory structures, and logistical infrastructure.

What are the different types of stablecoin risk?

If your business plans to hold or move stablecoins at scale, you’ll need to understand the full scope of stablecoin risk. Here are the main types of risk associated with using this currency.

Reserve risk

A stablecoin’s value depends on the assets backing it. If those reserves are insufficient, unclear, or tied up in risky investments, confidence weakens and the stablecoin’s peg can slip. In 2022, for example, depositors pulled out of TerraUSD en masse in a stablecoin bank run that wiped out almost half a trillion dollars from the crypto markets.

Liquidity and redemption risk

Even when reserves are technically there, they need to be liquid enough that token holders can cash out at scale. When reserves include nonliquid assets, issuers might slow or pause redemptions during market stress. That’s usually when the stablecoin’s peg slips or the price drops below $1. That’s a signal that holders no longer believe they can redeem at full value. In October 2025, this occurred to the algorithmic stablecoin USDe and it traded at 65¢ for a short time.

Regulatory and legal risk

Stablecoins are an emerging regulatory frontier. Businesses must follow developing Anti-Money Laundering (AML) regulations, as well as sanctions, tax, and licensing requirements, all of which can change with little notice. Some regulators classify stablecoins as securities or deposits, which leads to stricter oversight and limits how businesses can use them.

Logistical risk

Stablecoin transactions rely on complex infrastructure, including digital wallets, private keys, application programming interface (API) integrations, custodian systems, and the blockchain itself, which can fail or be compromised. On-chain transfers are irreversible so a misrouting can result in permanent loss. Phishing, malware, and credential theft are all credible threats as well: in 2024, a phishing attack stole $55 million in DAI stablecoins from a digital wallet.

Governance and counterparty risk

Every stablecoin has someone (or something) in control, whether that’s an issuer, a protocol, or a combination. When an issuer freezes redemptions or mishandles reserves, holders are stuck with the consequences, even if the stablecoin itself is well-designed. Governance attacks or rushed protocol changes can be equally destabilizing for decentralized systems.

How do reserve structures influence stablecoin risk?

A stablecoin’s reserve model is directly related to its risk profile. When reserves are tangible, liquid, and transparent, risk is low. When they’re not, risk increases. Here are the models currently used and their pros and cons.

Fully fiat-backed reserves

Fiat-pegged tokens are backed by cash and short-term government securities: assets that hold their value, can be sold quickly, and don’t introduce surprises during market stress. When issuers publish regular, independent attestations that show these reserves exist, the stablecoin tends to behave like traditional money. If disclosures are infrequent or vague, confidence falters and the peg slips.

Fractional reserve mixes

Issuers that hold cash and government securities, as well as commercial paper, loans, longer-dated debt, or other less liquid instruments, create more risk. If too many holders try to redeem at once, the issuer might not be able to unwind their positions fast enough. If a stablecoin stays pegged in good times but struggles (or breaks) when markets are volatile, this is probably why. Even large issuers can struggle if they incorporate riskier assets without making clear disclosures.

Crypto-backed (overcollateralized) reserves

Some stablecoins rely on crypto collateral instead of traditional reserves. To manage crypto volatility, they typically require overcollateralization, which means they hold more value in crypto than they issue in stablecoins. This model removes dependence on a central issuer and makes reserves transparent on the chain. But if crypto prices drop quickly, the system can become undercollateralized before automated liquidation mechanisms catch up. In extreme downturns, that safety margin can disappear nearly instantly.

Algorithmic or unbacked models

Algorithmic stablecoins try to maintain their pegs via incentives, secondary tokens, or supply adjustments rather than meaningful reserves. These systems are totally dependent on market confidence; if that falls, they can unravel in hours.

What vulnerabilities exist in stablecoin systems?

Even when a stablecoin is well-designed and backed sufficiently, the systems around it can create openings for failure. Knowing where these gaps exist helps teams check the right places when complications occur.

Here are some issues to watch for:

• Smart contract bugs: Many stablecoins use smart contracts to manage issuance, collateral, or settlement logic. Those contracts are permanent once they’re deployed so any coding mistakes can’t be patched in real time. Bugs such as reentrancy loops and arithmetic errors can drain funds or cause systems to behave unpredictably.

• Oracle manipulation: Stablecoins that depend on external price feeds—especially those with crypto-collateralized or algorithmic models—take on oracle risk. If an attacker can distort the data the stablecoin relies on, even briefly, they can cause forced liquidations or mispriced minting.

• Cross-chain bridge weaknesses: The bridges that connect blockchains are common targets in large crypto hacks. If a bridge is exploited, the tokens on the destination chain can become unbacked while the collateral on the origin chain is drained. As of February 2026, nearly $2.9 billion in cryptocurrency value has been stolen via bridge attacks. Bridges can also fail on their own and freeze assets in transit.

• Custodial exposure: Businesses that use third-party custodians or exchanges inherit the security risks of those platforms. A custodial breach, a misconfiguration, or an insolvency event can freeze or erase funds. In noncustodial models, key management remains a single point of failure.

• Infrastructure dependencies: Stablecoins depend on blockchain validators, remote procedure call (RPC) providers, node operators, cloud services, and occasionally compliance tooling. A failure in any layer can slow or stall movement.

How do settlement models introduce risk to stablecoins?

Stablecoins are a whole different way to move money. Their speed is useful, but it creates risks that traditional payment systems have never needed to contend with. Here are some potential areas of vulnerability.

Always-on settlement

Stablecoin transactions run 24 hours a day, which is a shift for finance and treasury teams used to predictable cycles. If large inflows or outflows come at odd hours, the organization has to be ready.

Irreversible transfers

Once it’s confirmed on the chain, a stablecoin payment is final. There’s no dispute process or reversal mechanism, even if you duplicated a payout or sent funds to the wrong address. This puts more pressure on internal controls such as accurate address management and multiperson approvals.

Blockchain dependence

Every stablecoin depends on its underlying blockchain. When a network becomes congested, fees peak or confirmations slow. If it goes down, payments stop entirely. In November 2025, the global network infrastructure platform Cloudflare experienced an outage that temporarily halted many crypto services.

Custody and key management

Holding stablecoins means managing private keys. Losing a key to carelessness or theft is equivalent to losing cash. If you use a custodian or exchange instead, you assume their operational risk (e.g., outages, hacks, misconfigurations, fraud). In that case, wallet setup, access controls, backups, and vendor selection matter as much as any blockchain-level safeguard.

How can organizations mitigate stablecoin risk?

Stablecoins work best when they’re supported by thoughtful controls. The goal is to enhance stability and minimize surprises.

Here’s how to get started:

• Choose a reliable stablecoin: Carefully evaluate reserve quality, transparency, and regulatory footing for each candidate. Favor coins backed by cash and short-term government securities with frequent third-party attestations. Avoid any designs that rely on unclear collateral or algorithmic mechanics.

• Educate internal teams: Ensure finance, treasury, compliance, engineering, and security all understand how the stablecoin works. Shared context and communication let everyone know what’s changing in day-to-day workflows.

• Define custody: Decide whether you’ll keep the coins yourself (i.e., self-custody) or use a third-party provider. Self-custody offers control but requires careful key management, while custodial solutions reduce operational load but add counterparty exposure.

• Integrate stablecoins into treasury operations: Assure that reconciliation, reporting, and cash management processes can handle on-chain data. Establish thresholds for stablecoin exposure that set in motion conversion back to fiat.

• Test in controlled environments: Run pilots with limited payments or partners before you scale. This creates low-stakes opportunities to identify friction.

• Have an exit strategy: Decide in advance how you’ll respond to peg slips, issuer problems, or regulatory restrictions. Planned thresholds and playbooks make it easier to act quickly and intentionally.

• Choose the right partners: Work with infrastructure providers, such as Stripe, that handle custody and payout operations with high security standards. The right partner can decrease the burden and help keep your stablecoin usage predictable and safe.

How Stripe can help

Stripe Payments provides a unified, global payment solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world. Businesses can accept stablecoin payments from almost anywhere in the world that settle as fiat in their Stripe balances.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs and access to 125+ payment methods, including stablecoins and crypto.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.

• Improve payment performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.